The prepayment agreement provides up to $200 million of crude oil sales primarily related to a portion of the company’s 2022 and 2023 Gulf of Mexico production, with $150 million committed by Trafigura, Kosmos Energy said Monday.
“Kosmos expects to execute $50 million of advance crude oil sales in June 2020. Later this year, following the completion of the prepayment agreement conditions subsequent, an additional $100-150 million of advance crude oil sales is expected, subject to finalizing additional commitments for $50 million,” the company said.
Kosmos did not provide any details on the amount of oil expected to be sold to Trafigura.
Neal Shah, Kosmos Energy’s recently appointed Chief Financial Officer, said: “At the start of the market downturn, Kosmos took decisive action to reduce costs, restructure hedges, and preserve liquidity. With this prepayment agreement, we have secured up to $200 million in additional liquidity to help us manage the business during this time of unprecedented volatility. This liquidity also gives us the flexibility to take advantage of opportunities that may arise in a dislocated market.”
Kosmos said it was evaluating the classification of the prepayment agreement as deferred revenue on its balance sheet, “although such accounting treatment is subject to final analysis.”
Kosmos last month said its realized oil and gas revenues, including the impact of hedging program, in the first quarter of 2020 had been $47.77 per boe.
Total net production in the first quarter of 2020 averaged approximately 66,300 boepd, at the upper end of guidance, of which 28,300 boepd net (80% oil) from the U.S. Gulf of Mexico.